On January 18, 2018 the California Supreme Court issued its opinion in McMillin Albany, LLC v. Superior Court (Supreme Court Case No. S229762). Andrew Morgan of Borton Petrini, LLP represented the McMillin entities in the appellate proceedings at both the Fifth District Court of Appeal and the California Supreme Court.

Consistent with Mr. Morgan’s argument, the Supreme Court opinion holds (1) that violation of the building standards set forth in SB800 (a.k.a. “Right to Repair Act”; Civil Code §§ 895 et seq.) provide the exclusive remedy for homeowners’ claims of construction defects and resulting property damage, and (2) that homeowners are obligated to proceed through SB800’s prelitigation inspection and repair process if their complaint alleges residential construction defects/property damage, regardless of what causes of action are contained in the complaint.

The Court’s opinion resolves a split in authority that was created by the McMillin Albany case via an opinion issued in August 2015 by the Fifth District Court of Appeal.

In 2013 the Fourth District Court of Appeal held that the violations of construction standards set out in the SB800 code “[do] not provide the exclusive remedy in cases where actual damage has occurred because of construction defects” and that SB800 “does not eliminate a property owner’s common law rights and remedies, otherwise recognized by law, where, as here, actual damage has occurred.” (Liberty Mutual Insurance Company v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98 (“Liberty”); see also Burch v. Superior Court (2014) 223 Cal.App.4th 1411.) In McMillin Albany (and in other construction defect cases all over California), homeowners avoided SB800’s prelitigation inspection and repair procedures by arguing that since they only brought causes of action for negligence and/or strict products liability (which was allowed by the Liberty case), as opposed to an SB800 cause of action, the homeowners were exempt from complying with SB800’s prelitigation procedure.

After a Motion to Stay the case to enforce SB800’s prelitigation procedures was denied by the trial court, McMillin filed a Petition for Writ of Mandate with the Fifth District Court of Appeal to challenge the ‘loophole procedure’ created by the Liberty case. In addressing the issue, the Fifth District explicitly rejected Liberty’s holding and instead held that a cause of action for violations of SB800’s building standards is the exclusive remedy for homeowners’ claims of residential construction defects and resulting property damage, and that homeowners must comply with the prelitigation procedures regardless of what causes of action are contained in the homeowners’ complaint. (McMillin Albany v. Superior Court (2015) 239 Cal.App.4th 1132; and see Third District cases Elliott Homes, Inc. v. Superior Court (2016) 6 Cal.App.5th 333 and Gillotti v. Stewart (2017) 11 Cal.App.5th 875.)

At the request of the homeowners, the California Supreme Court granted review of the issues as they were presented to the Fifth District. The Supreme Court’s January 18, 2018 opinion explicitly adopts McMillin’s reading of the SB800 statutory scheme and affirms the Fifth District’s opinion in full, explicitly disapproving the Liberty case.

As a result of the Supreme Court’s opinion, California’s Right to Repair Act will again be enforced by trial courts across the state consistent with the true intent of the California Legislature. Trial courts are no longer bound to follow Liberty’s erroneous holding and they will be free to enforce builders’ rights to engage in the prelitigation inspection and repair procedures, regardless of homeowners’ “creative” pleading.

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